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WDAY: Benefiting from Cloud

March 26, 2014 | About:
mitu77

mitu77

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As the sun is rising on cloud-enabled services, many companies are joining the cloud band wagon. Workday (WDAY) does not want to miss this opportunity and is focused on the cloud market. It also entered into a strategic tie up with bigger players like Salesforce to broaden its horizon. Workday is a well-known player in cloud-enabled solutions, and a tie-up with Salesforce looks like good news for both companies.

Financial Growth

Workday is a subscription-based cloud-enabled software solution provider. The main software solutions provided by Workday relate to financial management and human capital management. The company has been recording high growth rate in revenues. It recently declared its quarterly and annual report, and the result were outstanding.

For fourth quarter 2014, it recorded a revenue of $141.9 million, increased by 74% year over year. For fiscal 2014, total revenue generated was 468.9 million; this again is 71% growth as compared to fiscal 2013.

In fiscal 2014, 78% of the revenue was generated from cloud-enabled software license, this being the main business model of the company. Total revenue of $354.2 million was generated from licensing; this again is 85% growth compared to previous year.

The growth in revenue is mainly attributable to 200 new customers in the fourth quarter.

Journey Ahead

The company is all set to establish its footprints globally. It eyes the European market, and it plans to release Workday Payroll for France and the UK. The release of payroll system for these regions is targeted by 2016. Workday is expected to grow at a solid pace going forward. In fact, Yahoo Finance estimates suggest that Workday's earnings will grow at a terrific annual rate of 48.8% for the next five years. This is certainly an impressive growth rate, and tie-ups with bigger companies such as Salesforce.com should also aid Workday's growth.

Working on Customers' Feedback

The company has been meticulously enhancing the features of the software with user-friendly interface to target a wider customer base and keep existing customers satisfied. Customers are provided with regular updates which helps Workday in retaining existing clients, with new clients being regularly added. Updates for Workday 21 provide 240 news features in HR and Finance modules. Sixty-five out of 241 features were based on the feedback provided by the existing customers. The company is conducting a mega event “Rising Europe” at month-end (31-APR-2014 to 02-APR-2014). This event basically targets one-to-one interaction with customers for feedback and suggestions.

Conclusion

Workday is not expected to be profitable anytime soon as it invests in its growth, but analysts expect solid long-term performance. The company has beaten earnings estimates comprehensively in the last four quarters. This further gains investor confidence. Hence, it looks as if Workday has been making the right moves to grow its business, and its better-than-expected performance could continue with the proliferation of cloud computing.

Investors with a higher risk appetite would probably like Workday more due to its terrific earnings growth estimates.


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